Service Quality and Its Relation to Customer Trust and Loyalty

Lisa Binti Harun and Herlina

Business Administration, Politeknik Negeri Nunukan, Ujang Dewa, Nunukan, Indonesia

Keywords: Service, Service Quality, Customer Trust, Customer Loyalty.

Abstract: A consumer's perception of the quality of services offered is an essential aspect of consumer perception, which

influences consumer satisfaction.Services have a strong relation to quality. A better quality service will give

a better image in consumers' perception and improve their overall well-being. The improvement later would

lead to their trust and loyalty. The study aims to analyze the relationship between service quality and consumer

trust and loyalty in PT. Telkom Nunukan branch. The approach of the study uses a quantitative with an

explanatory survey method. It can be concluded that service quality positively and significantly impacts

customer trust and loyalty.

1 INTRODUCTION

Humans in their daily are inseparable from needs

towards goods and services.Those needs that can be

directly consumed or reprocessed. Thus, services

have evolved into an essential component of product

marketing activity. Services are a concrete activity

that one person provides to another, and the client is

more involved in the service-consuming process.

Services have a strong relations to quality. It

compares the anticipated service with the actual

service provided (Hidayat and Anasis, 2020). Service

quality is a crucial component in consumer

perception, which has an impact on consumer

satisfaction. A better quality of services provided will

give a better image in consumers’ perception.

Furthermore, there are five dimensions of service

quality known as SERVQUAL:(a)Reliability,

(b)Responsivenesss, (c) Assurance, (d) Empathy, and

(e) Tangible (Pakurár et al., 2019).

Some experts consider customer trust to be an

essential factor determining the success of

relationship marketing. This view is that customers

must have trust in the company, customers will feel

safe in conducting transactions with the company,

and transactions made will be guaranteed for

sure.Trust is the belief that a person will find what he

wants in others, not what he fears and later it become

an immediate effect on the decision that customers

must make, either to pursue or to end their

relationship with a firm (Nguyen et al., 2013). It can

reduce the risk of using services, because it can be

considered as a consequence of a positive evaluation

of service and customer loyalty (Putra et al., 2020).

Trust relies on someone or something that believes to

have consequences in the relationship between the

giver of trust and the one who is given the trust.

Reference (Erne, 2022) view the concept of trust as

the same as integrity, loyalty, concern, and keeping

promises. Trust is a critical element in meaningful

relationships; they build trust through networks of

friends and family.

There are three elements to create trust: shared

values, communication, and opportunistic behavior

(Morgan and Hunt, 1994). Moreover, three aspects

contribute to the formation of trust: ability, which

refers to the seller's or organization's skill and

qualities in influencing and authorizing a given field;

reputation; and legitimacy (Palilati, 2007). In this

case, the seller's ability to provide, serve, and secure

transactions from interference of other parties.

Additionally, there is benevolence, which is the

seller's willingness to create mutually beneficial

satisfaction for himself and the buyer. The seller can

minimize the profit obtained, but customer

satisfaction is also high. In addition, the final factor is

integrity, which relates to the seller's conduct or

business practices. Whether or not the information

given to consumers is accurate.

Long-term relationships with consumers in the

service and manufacturing industries hinge on

consumer confidence in the organization. Trust is the

essence of human connection complexity. This idea

is a future-oriented aspect of quality connections.

142

Harun, L. and Herlina, .

Service Quality and Its Relation to Customer Trust and Loyalty.

DOI: 10.5220/0011729500003575

In Proceedings of the 5th International Conference on Applied Science and Technology on Engineering Science (iCAST-ES 2022), pages 142-147

ISBN: 978-989-758-619-4; ISSN: 2975-8246

Appears to exist when consumers are willing to rely

completely on the company's future actions.

Reference (Ferinnadewi and Djati, 2004) provides

empirical evidence that consumer confidence in the

service sector created human dimensions such as

responsiveness, assurance, empathy, and reliability.

The impact on consumer loyalty is even more

significant when consumers who already have that

trust feel satisfied.Reference (Delgado‐Ballester et

al., 2001) proposes that the dimensions of trust are

divided into two parts, namely:

a. Brand can be Trusted (Brand Reliability)

Brands can help/satisfy consumer needs. Brands

influence individual beliefs to fulfill promises in

product operations.

b. Interest in the Brand(Brand Intentions)

Dimensions make individuals feel there is a guarantee

that the brand will be responsible and pay attention to

consumers.

Therefore, trust plays a vital role in the long-term

relationship between customers and the company,

mainly which includes customer confidence in the

quality, reliability, and integrity of the services

delivered by the company.

In the other hand, loyalty is an ancient term

traditionally used to describe loyalty and enthusiastic

devotion to a country, cause, or individual. In

contemporary business contexts, the term loyalty

describes the willingness of customers to continue to

subscribe to a company in the long term by buying

and using its goods and services repeatedly and

preferably exclusively and voluntarily recommending

the company's products to friends and colleagues

(Lovelock, 2007); (Putra et al., 2020). The

establishment of customer loyalty is not immediate,

but rather the result of a learning process and regular

service purchase over time. The greatest difficulty for

service marketers is to provide prospective

consumers with compelling reasons to do business

with them, maintain client loyalty, and increase

service usage. The effect of loyalty on the company

is that it gives a long-lasting source of income.

Customers will remain loyal only if they see that they

are receiving greater value (including superior

quality) than they would by moving to a different

service provider.

Loyal customers are those who have a positive

outlook on the firm, are devoted to repurchasing its

products or services, and recommend them to others.

It is a symptom that clients are reluctant to switch to

competitors due to their faith and reliance on the

quality of the service supplied (Elizar et al., 2020).

Customer loyalty occurs when repeated purchases by

the same customers and their willingness to

recommend products to other customers without

direct rewards. Ultimately, repeated use will impact

measurable financial results (Ramzi and Mohamed,

2010).

There are three dimensions to loyalty: behavioral,

attitude, and cognitive. Behavioral loyalty is assessed

by the frequency of purchases of the company's

products and services; attitudinal loyalty is measured

by client purchases; and cognitive loyalty is measured

by the customer's perceptions about the product.

Customer loyalty is the final effect of a purchase,

which expresses an attitude and intention to behave in

the future. It expresses a commitment to repurchase

the product needed by the company, a commitment to

recommend to others, an intention to increase the

amount of savings, an intention to or a desire to tell

positive things about the company, and a willingness

to pay a high price (Palilati, 2007); (Hidayat and

Anasis, 2020). From several opinions regarding

customer loyalty, the conclusion is that customer

loyalty is a positive attitude toward a service provider

by repurchasing products or services offered in the

long term and recommending the company to

colleagues and their families.

2 PROBLEM STATEMENT

1. Does the service quality has a significant effect

towards customer’s trust?

2. Does the service quality has a significant effect

towards customer’s loyalty?

3. Does the customer’s trust has a significant effect

towards customer’s loyalty?

4. Does the service quality has a significant

effecttowards customer’s trust and loyalty?

3 METHOD

3.1 Data Collection

The study is a quantitative study that involves

questionnaires and interviews as the method of

collecting data. Further, data were collected using the

probability sampling technique by distributing

questionnaires to 312 respondents.

It integrated the research variables: service

quality, customer trust, and loyalty. Furthermore,

each variable contains supporting indicators. The

indicators in service quality variables were tangible

(KP1), reliability (KP2), responsiveness (KP3),

assurance (KP4), and empathy (KP5). Meanwhile, for

Service Quality and Its Relation to Customer Trust and Loyalty

143

customer trust, the indicators were brand reliability

(K1&K2) and brand intentions (K3&K4). On the

other hand, the indicators of customer loyalty were

consistent buying (L1), recommending the products

to others (L2&L3), and consumers not moving to the

rival (L4&L5).

The next stage of the study was the validity and

reliability testing of the instrument using the SPSS 22

version to ensure the appropriateness of all items

from the questionnaire. The Path Analysis instrument

was used using the SmartPLS version 3.20. The steps

of the analysis were designing a structural model

(internal and external models), constructing a path

diagram, converting the Path diagram to regression,

parameterizing the hypothesis, and testing the

hypothesis. Source: SmartPLS ver.3 Output of

processed primary data.

Figure 1: Constructing Path Diagram.

4 RESULT AND DISCUSSION

4.1 Evaluation of Measurement Model

(Outter Model)

4.1.1 Convergent Validity Test

Figure 2: Output Loading Modelling Factor.

Table 1: Output Loading Modelling Factor.

Service Quality Trust Loyalty

X Y1 Y2

KP1 0,719

KP2 0,717

KP3 0,795

KP4 0,644

KP5 0,701

K1 0,730

K2 0,748

K3 0,742

K4 0,642

0,741

0,677

0,763

0,613

0,777

The results in table 1 indicate that the loading factor

gives a value above the specified value, which is 0.5,

so the indicators used in this study have met and are

said to be valid.

4.1.2 Discriminant Validity Test

For reflective indicators, it is necessary to test

discriminant validity by comparing the values in the

cross-loading table. An indicator is declared valid if

it has the highest loading factor value for the intended

construct compared to the loading factor value for

other constructs.

Table 2: Output result for Cross Loading.

Service Quality Trust Loyalty

X Y1 Y2

KP1 0,719 0,419 0,248

KP2 0,717 0,349 0,282

KP3 0,795 0,419 0,259

KP4 0,644 0,353 0,387

KP5 0,701 0,377 0,356

K1 0,443 0,730 0,344

K2 0,418 0,748 0,394

K3 0,365 0,742 0,323

K4 0,301 0,642 0,405

L1 0,482 0,428 0,741

L2 0,326 0,401 0,677

L3 0,276 0,142 0,763

L4 0,302 0,193 0,613

L5 0,359 0,235 0,777

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144

4.1.3 Average Variance Extracted (AVE)

Table 3: Output result of average variance extracted.

Variabel AVE

Service Quality 0,514

Trust 0,513

Loyalty 0,514

The results from table 3, the Average Variance

Extracted (AVE) calculation, indicate that all the

variables measured in this study have a variance value

of more than the index value of 0.5. So it can be said

that all the variance variables.

4.1.4 Reliability Test

Table 4: Reliability test results.

Variable Remark

Cronbach’s

Alpha

Composite

Reability

Remark

Service

Quality

(X) 0,762 0,840 Reliable

Trust (Y1) 0,683 0,808 Reliable

Loyalty (Y2) 0,771 0,840 Reliable

Table 5: Indicator reliability test results.

Variable Remark

Cronbach

Alpha

Remark

Service

Quality(X)

KP1 0,832 Reliable

KP2 0,832 Reliable

KP3 0,830 Reliable

KP4 0,832 Reliable

KP5 0,831 Reliable

Trust (Y1)

K1 0,830 Reliable

K2 0,830 Reliable

K3 0,832 Reliable

K4 0,832 Reliable

Loyalty(Y2)

L1 0,826 Reliable

L2 0,831 Reliable

L3 0,833 Reliable

L4 0,836 Reliable

L5 0,828 Reliable

Table 4 shows that all the variables measured in this

study have Cronbach's Alpha and Composite

Reliability values more than the index value of 0.6.

Therefore all variables are reliable.

4.2 Structural Evaluation

(Inner Model)

4.2.1 R

Testing

Table 6: Output calculation of R

R Square

Trust 0,286

Loyalty 0,292

The value of R-squared (R2) is used to measure how

much influence certain independent latent variables

have on the independent latent variables. The result

of R2 of > 0.67 indicates that the model is good, >

0.33 indicates a moderate model, > 0.19 indicates a

weak model, and> 0.17 indicates a weak model. Table

5.24 shows the R2 value of this study at 0.286 and

0.292, which means it has a weak model value.

4.2.2 Significance Test

a) Output Path Coefficient

Table 7: Output path coefficient.

Original

Sample

(O)

Sample

Mean

(M)

Standard

Error

(STERR)

Statisti

(|O/ST

ERR|)

Valu

X -

>Y1

0,394 0,401 0,059 6,697 0,000

X-

>Y2

0,220 0,222 0,059 3,705 0,000

Y1-

>Y2

0,537 0,548 0,054 9,876 0,000

b) Output Indirect Effect

Table 8: Output indirect effect.

Original

Sample

(O)

Sample

Mean

(M)

Standard

Error

(STERR)

T Statistics

(|O/STERR|)

Value

X-

>Y1-

>Y2

0,211 0,216 0,039 5,449 0,000

X-

>Y1-

>Y2

0,211 0,216 0,039 5,449 0,000

Before testing the hypothesis, it is known that the T-

table value for the 95% confidence level (5% by

Service Quality and Its Relation to Customer Trust and Loyalty

145

testing two parties so that the alpha becomes 0.025)

and the degrees of freedom (df) = n-2 = 312-2 = 310

is 1.971. Hypothesis testing for each latent variable

relationship is shown as follows:

Table 9: Hypothesis testing.

No Results Examined Decision

1 T-test 0.394 H0 Rejected

H1 Accepted

SQ has

significant

effect on CT

2 T-test 0.220 H0 Rejected

H1 Accepted

SQ has

significant

effect on CL

3 T-test 0.537 H0 Rejected

H1 Accepted

CT has

significant

effect on CL

4 T-test 0.211 H0 Rejected

H1 Accepted

SQ has

significant

effect on CT and

1. The influence of service quality on trust

The results suggested that the quality of service has a

major impact on consumer confidence in PT. Telkom

Nunukan Branch's telecommunications services. It

shows that the higher a company's service quality, the

more reasonable or strong consumer confidence will

be, and vice versa; if the company's service quality

declines, so will consumer confidence.

2. The influence of service quality on customer

loyalty

The results indicated that the quality of service has a

major impact on consumer loyalty to PT. Telkom

Nunukan Branch's telecommunications services. It

can be read that a company's customer loyalty will be

reasonable or high if its perceived service quality is

high, and vice versa; if the company's service quality

declines, consumer loyalty will also decline. Based on

this research, service quality plays a crucial part in

developing a general perception that affects customer

loyalty to a firm, demonstrating that good service

quality will lead to high customer courtesy, which can

improve customer loyalty.

3. The influence of customer trust on customer

loyalty

The results showed that consumer trust significantly

influences customer loyalty to telecommunication

services PT. Telkom Nunukan Branch. It can be

interpreted that the higher consumer trust in the

company, the consumer loyalty formed will also be

high, and vice versa; if consumer trust in the company

decreases, the formed consumer loyalty will

decrease.Based on this research, customer trust is

vital in forming a sense of security and trust in the

company, which will affect the level of loyalty itself.

4. The Influence of Service Quality on Customer

Trust and Loyalty

The results indicated that the quality of service

significantly influenced the trust and loyalty of

customers of telecommunications services PT.

Telkom Nunukan Branch. It can be interpreted that

the better the quality of service, the higher the

customer's trust in the company, and it will also

increase loyalty and vice versa. If the quality of

service is lacking, the customer's trust in the company

decreases, and the formed customer loyalty will

decrease. Customer loyalty is the final effect of a

purchase, defined as an attitude and intention to

behave in the future. It is expressed through a

commitment to re-purchase the product needed by the

company and a commitment to recommend it to other

people, the intention to increase the amount of

savings, the intention or desire to tell positive things

about the company, and the willingness to pay dearly.

5 CONCLUSIONS

Based on the overall discussion, service quality has a

positive and significant impact on customer trust and

loyalty. Service quality has a significant effect on

customer trust, which directly and indirectly affects

customer loyalty.

ACKNOWLEDGEMENTS

Politeknik Negeri Nunukan financed/partially

supported this research. We appreciate the assistance

of our colleagues and the director of Politeknik

Manufaktur Bandung in completing this research. We

would also to show our gratitude to:

1. Arkas Viddy, Ph.D as Director of Politeknik

Negeri Nunukan who contributed in stimulated

this research.

2. Dr. Besse Asniwaty, SE, MSi, as Vice Director

1 of Politeknik Negeri Nunukan who

contributed in stimulated this research.

3. Dr. Rafiqoh, SE, MM as Vice Director 2 of

Politeknik Negeri Nunukan who allocated the

budget for this research.

We also immensely grateful to all reviewers of

ICAST especially for all of their insights.

iCAST-ES 2022 - International Conference on Applied Science and Technology on Engineering Science

146

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